Tufts University Service Center Policy

This policy statement establishes Tufts University’s policies and procedures for the financial management of Service Centers that will assure compliance with sound accounting principles and government regulations. Listed below are the specific components within the policy should you wish to go directly to a particular section.

Definitions
General Policies
Setting Animal Care Facilities Rates
Service Centers that Provide Multiple Services
Cost Allocations
Equipment Purchases
Standard Billing Rates
Services Provided to Outside Parties
Transfers of Funds Out of Service Centers
Subsidized Service Centers
Records Retention
Establishment of New Service Centers
Review of Service Centers
Technical Assistance

 

DEFINITIONS

Service Center: An activity that performs specific technical or administrative services, primarily for the internal operations of the University and charges users for its services. There are three types of service centers defined as follows:

  • Recharge Activity: A service center with annual direct operating costs of less than $100,000.
  • Specialized Service Facility: A large service center that (a) provides services to a select group of users rather than to overall University operations, and (b) has combined annual direct operating costs of $1,000,000 or more.
  • Service Facility: All service centers that DO NOT fall within the definition of a recharge activity or a specialized service facility.

Direct Operating Costs: All costs that can be directly identified with a service provided by a service center. These costs include the salaries, wages and fringe benefits of University faculty and staff directly involved in providing the service; materials and supplies; purchased services; travel expenses; and equipment rental.

Internal Service Center Overhead: All costs that can be specifically identified to a service center, but not with a particular service provided by the center, such as the salary and fringe benefits of the center director.

Institutional Indirect Costs: The costs of administrative and supporting functions of the University such as operations and maintenance of buildings; building and equipment depreciation; and interest associated with financing of buildings.

Unallowable Costs: Costs that cannot be charged directly or indirectly to federally-sponsored programs. These costs are specified in Circular A-21 and the University’s Travel and Business Expense Policy.

Applicable Credits: Transactions that offset or reduce costs, such as purchase discounts, rebates or allowances.

Equipment: An item of tangible personal property having a useful life exceeding one year and an acquisition cost of $5,000 or more.  Purchases under this amount are considered consumable supplies.

Billing Unit: The unit of service provided by a service center. Examples of billing units include hours of service, animal care days, tests
performed, machine time used, etc.

Billing Rate: The amount charged to a user for a unit of service. Billing rates are usually computed by dividing the total annual costs of a
service by the total number of billing units for the period.

Surplus: The amount that the revenue generated by a service exceeds the costs of providing the service during a fiscal year.

Deficit: The amount that the costs of providing a service exceed the revenue generated by the service during a fiscal year.

 

 

GENERAL POLICIES

  1. Billing rates should be designed to recover the direct operating costs of providing the services on an annual basis including internal service center overhead. No costs other than the costs incurred in providing the services should be included in the billing rates. The costs should exclude unallowable costs (found in Section J of OMB Circular A-21) and be net of applicable credits.  For service facilities and specialized
    service facilities, the computation of the billing rates may also include the facility’s allocable share of institutional indirect costs.
  2. Billing rates should be computed annually for the start of each fiscal year. The rates should be based on a reasonable estimate of the direct operating costs, and where applicable, indirect costs of providing the services for the year.  These estimates can be determined through use
    of historical costs and billing units or projected costs and billing units.  In some cases, the service center may charge a market price, so long as it recovers no more than cost by doing so.
  3. If circumstances change significantly (sales volume or costs) during a fiscal year, then billing rates should be adjusted. A new rate calculation and rate sheet should be sent to the Dean’s Office and to Finance and Planning for approval. All billing rates must not discriminate between federally and non-federally supported users.
  4. All users should be charged for services during the fiscal year the service is rendered. Monthly or quarterly bills should be processed and charged to user DeptID’s or ProjectID’s.  Any adjustments can be made in the subsequent billing period(s)
  5. All users of the service center must be billed at the approved rates.  Non-federal customers may be charged a surcharge in excess of the billing rates.
  6. Separate DeptID’s should be established in the University’s accounting system to record the actual direct operating costs of the service center, internal service center overhead, revenues from billings and surpluses or deficits.  Documentation to support units of service,
    billings and rate calculations should also be maintained.
  7. Actual costs and revenues should be compared at the end of each University fiscal year. Deficits or surpluses should be carried forward as an adjustment to the billing rates of the following year or the next succeeding year.
  8. Any service center agreements with outside parties must be reviewed by the Office of the Vice Provost to ensure that the agreement provisions are in conformance with the university policies. The Office of the Vice Provost decides whether the agreement is classified internally as sponsored research. Any collaboration agreements with PI’s who operate service centers that delineate publication and
    intellectual property rights are processed as sponsored research activity.

 

SETTING ANIMAL CARE FACILITIES RATES

Rates for animal care facilities should be calculated according to the NIH National Center for Research Resources’ (NCRR) Cost Analysis and Rate setting Manual for Animal Research Facilities (CARS).  This can be found at: http://grants.nih.gov/grants/policy/air/rate_setting_manual_2000.pdf.

SERVICE CENTERS THAT PROVIDE MULTIPLE SERVICES

Where a service center provides different types of services to users, separate billing rates should be established for each service that represents a significant activity of the service center. The costs, revenues, surpluses and deficits should also be separately identified for each service. Any material surpluses or deficits related to each service should be carried forward as an adjustment to the billing rate for that service in the following year or the next succeeding year. The surplus from one service may be used to offset the deficit from another service only if the mix of users and level of services provided to each group of users is approximately the same.

COST ALLOCATION

Where separate billing rates are used for different services provided by a service center, the costs related to each service must be separately identified through a cost allocation process.  Cost allocations will also be needed where a cost partially relates to the operations of a service center and partially to
other activities of a department or other organizational unit.

Depending on the specific circumstances involved, there may be three categories of cost that need to be allocated: (a) costs that are directly related to providing the services, such as the salaries of staff performing multiple services, (b) internal service center overhead, and (c) in the case of service facilities and specialized service facilities, institutional indirect costs.

When cost allocations are necessary, they should be made on an equitable basis that reflects the relative benefits each activity receives from the cost. For example, if an individual provides multiple services, an equitable distribution of his or her salary among the services can usually be accomplished by using the proportional amount of time the individual spends on each service. Other cost allocation techniques may be used for internal service center overhead and institutional indirect costs, such as the proportional amount of direct costs associated with each service, space utilized, etc. Questions concerning appropriate cost allocation procedures should be made to the Director of Cost and Capital Analysis in the Finance & Planning office.  Finance & Planning will also be responsible for providing institutional indirect costs for service facilities and specialized service facilities.

 

EQUIPMENT PURCHASES

Expenditures for capital equipment purchases should NOT be included in the costs used to establish service center billing rates. The costs may, However, include depreciation of the equipment. The inclusion of equipment depreciation in the billing rates will generate funds that will enable service centers to purchase equipment needed in the future. Depreciation may never be taken on equipment purchased with federal funds. A listing of
capital equipment, with inventory identification and depreciation amounts, used in service centers can be provided by the Capital Asset Administrator in the Purchasing and Property Department.  The funds represented by the depreciation should be set aside in an equipment replacement reserve fund. When a service center needs to purchase a new item of equipment the purchase may be made from the service center’s equipment replacement reserve fund following normal University procedures. If the amount in the equipment replacement reserve fund is not sufficient to cover the cost of the new equipment, a request for funds to purchase the equipment should be submitted in accordance with University procedures.  Finance and Planning must be contacted prior to any depreciation being included in billing rates.

STANDARD BILLING RATES

Users should normally be charged the published rates for a service center’s services. This requirement does not apply to alternative pricing structures related to the timeliness or quality of services.  Pricing structures based on time-of-day, volume discounts, turn-around time, etc. are acceptable, provided that they have a sound management basis and do not result in recovering more than the costs of providing the services.

SERVICES PROVIDED TO OUTSIDE PARTIES

If a service center provides services to individuals or organizations outside of the University, the billing rates may include institutional indirect costs even though these costs are not included in the rates for internal University users. Additionally, non-federal users may be charged a surcharge or a higher rate than that charged to internal/federal users.   Any amounts charged to parties in excess of the internal/federal University billing rates should be excluded from the computation of a service center’s surpluses and deficits for purposes of making carry-forward adjustments to future billing rates.

TRANSFERS OF FUNDS OUT OF SERVICE CENTERS

Except for transfers to the equipment replacement reserve fund discussed in section VII, it is normally not appropriate to  transfer funds out of a service center DeptID to the University’s general funds or other DeptID’s.  Finance & Planning must approve all transfers out of service center DeptID’s.

SUBSIDIZED SERVICE CENTERS

In some instances, the University, or a school or department, may elect to subsidize the operations of a service center, either by charging billing rates that are intended to be lower than costs or by not making adjustments to future rates for a service center’s deficits.  Service center deficits caused by intentional subsidies cannot be carried forward as adjustments to future billing rates.  Since subsidies can result in a loss of funds to the University, they should be provided only when there is a sound programmatic reason and approved by the School in which the service center resides.

RECORDS RETENTION

Financial, statistical and other records related to the operations of a service center must be retained for three years from the end of the fiscal year to which the records relate. Records supporting billing rate computations must be retained for three years from the end of the fiscal year covered by the computations.

ESTABLISHMENT OF NEW SERVICE CENTERS

 

The establishment of new service centers must be reviewed by Finance & Planning and the Manager of Taxation Services and approved by the dean or
executive administrative dean of the school where the center will be located.  The requests for approval must contain the following information:

  1. A description of the services to be provided and the users of the services.
  2. The reason why the services can best be provided by an internal service center rather than by an external service provider.
  3. A multiyear budget/business plan including projected costs and utilization of the services.
  4. Billing rate calculations with supporting data. In certain instances, Finance & Planning will work with the school or department to develop billing rates.
  5. Where possible, a comparison of rates charged by external service providers.

REVIEW OF SERVICE CENTERS

Finance & Planning will conduct periodic reviews of the financial operations of service centers. These reviews will focus on the development of billing rates, the handling of surpluses and deficits, and the adequacy of the service center’s record keeping procedures. Any major problems or compliance issues that arise as a result of these reviews will be referred to the Fiscal Officer or Finance Director of the school where the center resides.

TECHNICAL ASSISTANCE

Finance & Planningis available to provide technical assistance and advice on the financial management of service centers. This assistance may be requested in connection with the development of billing rates, cost allocation procedures, handling of surpluses and deficits, equipment depreciation, record keeping, etc.